The most common question I get from first-time clients isn't about the market. It's "what do you cost?" And the answer surprises people every time: for tenants and buyers, nothing. Here's how the money actually flows in commercial real estate, because once you see it, several decisions get much easier.
Where commissions come from
On a lease, the landlord budgets a commission as part of the deal economics, the same way they budget tenant improvements and free rent. On a sale, the seller does the same through the listing agreement. That money is committed on their side of the table before you ever show up.
If you don't have your own representative, the listing broker typically keeps the full commission. The landlord doesn't save it, and you certainly don't.
When a tenant or buyer brings their own broker, the commission splits between the listing side and the client's side. Nothing is added to the rent or the price to fund it; it was already there. Which produces the strange arithmetic of this business: an unrepresented tenant pays the same commission load as a represented one, and gets nothing for it.
What that means in practice
For tenants: the landlord has a broker whose legal duty is the landlord's income. Your rent, your escalations, your TI package, and your renewal options are all negotiated against a professional. Representation puts a professional on your side at a cost of zero, which is why my tenant representation process starts with the sentence "this costs you nothing" and then has to spend a paragraph convincing people it's true.
For buyers: same structure. The seller's listing carries the commission; your representation comes out of the split. On owner-user purchases, that means underwriting help, SBA lender coordination, and negotiation advocacy, the whole acquisition process, paid from the seller's side.
For sellers and landlords: you're the one funding commissions, so structure them deliberately. A commission is a marketing tool: it prices the effort the brokerage community will spend bringing you tenants and buyers. Setting it below market to save a point often costs multiples of that point in vacancy time.
The conflict worth understanding
The structural question isn't the fee, it's alignment. When one brokerage represents the landlord on the building and also "helps" the tenant, information flows one direction. Dual agency is legal with disclosure in California, and plenty of deals close that way. But a tenant or buyer with their own advocate, one who doesn't depend on that landlord's listings for next year's business, never has to wonder whose deal is being optimized.
Ask any broker you interview two questions: who else do you work for in this submarket, and who pays you on my deal. The good ones answer both without flinching.
FAQ
Who pays the commission in a commercial lease?
The landlord, in nearly all cases. Commissions are built into the deal economics on the landlord's side and get paid whether the tenant has representation or not.
Does hiring a tenant rep broker increase my rent?
No. The commission is already in the landlord's deal economics. Unrepresented tenants don't get a discount for it; represented tenants typically negotiate better total economics than the fee could ever cost.
Who pays the broker when I buy a building?
The seller, in nearly all cases, through the commission structure of the listing, split with the buyer's broker at no added cost to the buyer.
What is dual agency in commercial real estate?
When one brokerage represents both sides of the same transaction. It's legal with disclosure in California, but it concentrates information in one place, which is why many tenants and buyers prefer an advocate with no ties to the other side.
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